Appendix A. Bio-Fuel Specificationsthe use of any fuel are not Caterpillar factory defects and...

Viejas Tribal Government Renewable Energy Development on Tribal Lands of Viejas Study Appendix A. Bio-Fuel Specifications

Appendix A. Bio-Fuel Specifications

22 September 2005 A-1 Black & Veatch

Information Release Memo !�!�

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March 2001

CATERPILLAR POSITION ON THE USE OF BIODIESEL FUEL

This document applies, within the stated limitations, to Caterpillar engines.

Introduction:

With increased world interest in emissions and reducing the use of petroleum distillate based fuels, many governments and regulating bodies encourage the use of biofuels. Governmental incentives and/or environmental legislation to use biofuels may have an impact on the sales and use of Caterpillar engines and equipment. This document outlines Caterpillar’s criteria and parameters when using biodiesel fuel.

Biodiesel is a fuel that can be made from a variety of sources, primarily from soybean oil or rapeseed oil. Without esterification, these oils gel in the crankcase and fuel tank and may not be compatible with many of the elastomers used in today’s engines. In their original form, these oils are not suitable for use as a fuel in compression ignition engines. To use these oils as fuel, they must be esterified. Alternate base stocks for biofuel may include animal tallow, waste cooking oils, or a variety of other feedstocks.

ASTM has recently authored a provisional specification for biodiesel, PS121. Caterpillar recognizes BioFuels meeting the ASTM PS121, DIN 51606 or the Caterpillar biodiesel specification.

Caterpillar certifies its engines using the prescribed EPA and European Certification Fuels. Caterpillar does not certify engines on any other fuel. It is the user's responsibility to use the correct fuel as recommended by the manufacturer and allowed by EPA or other local regulatory agencies. It is the responsibility of the user to obtain the proper local, regional, and/or national exemptions required for the use of biodiesel in any emissions regulated Caterpillar engine.

PELE0805 © 2001 Caterpillar

PMP01-01 2

Warranty and the Use of Biodiesel Fuel in Caterpillar Engines

Caterpillar neither approves nor prohibits the use of biodiesel fuels. Caterpillar is not in a position to evaluate the many variations of biodiesel fuels, and the long-term effects on performance, durability or emissions compliance of Caterpillar products. The use of biodiesel fuel does not affect Caterpillar’s materials and workmanship warranty. Failures resulting from the use of any fuel are not Caterpillar factory defects and therefore the cost of repair would NOT be covered by Caterpillar's warranty.

Recommendation for the use of Biodiesel Fuel in Caterpillar Engines

For Caterpillar 3046, 3064, 3066, 3114, 3116, 3126, 3176, 3196, 3208, 3306, C-10, C-12, 3406, C-15, C-16, 3456, 3408, 3412, 3500 series, 3600 series, CM20, CM25 and CM32 engines: Biodiesel meeting the requirements listed in Caterpillar’s biodiesel specification or, meeting either ASTM PS121 or DIN 51606, are acceptable. They may also be blended in any percentage with an acceptable diesel fuel, provided the biodiesel constituent meets the requirements outlined in the Table prior to blending.

For Caterpillar 3003 through 3034, 3054 and 3056 engines: Biodiesel meeting the requirements listed in Caterpillar’s biodiesel specification, or meeting either ASTM PS121 or DIN 51606, may be blended with an acceptable diesel fuel at a maximum of 5% biodiesel fuel blended with 95% diesel fuel. The biodiesel must meet the requirements outlined in the Table prior to blending. Use of more than a 5% biodiesel fuel can cause premature failures whose repair would not be covered under Caterpillar warranty.

When burning biodiesel, or any blend of biodiesel, it is the responsibility of the user to obtain the proper local, regional, and/or national exemptions required for the use of biodiesel in any emissions regulated Caterpillar engine. When using a fuel that meets the Caterpillar’s Biodiesel specification, ASTM PS121, or DIN 51606 specifications, and when adhering to the following recommendations, the use of biodiesel should pose no problems.

IRM\10471010.DOC

PMP01-01 3

Recommendations:

� The oil change interval can be affected by the use of biodiesel fuel. Use Scheduled Oil Sampling (SOS) to monitor the engine oil condition and to determine the optimum oil change interval.

� Biodiesel provides approximately 5-7% less energy per gallon of fuel when compared to distillate fuels. To avoid engine problems when the engine is converted back to 100% distillate diesel fuel, do not change the engine rating to compensate for the power loss.

� Elastomer compatibility with biodiesel is still being monitored. The condition of seals and hoses should be monitored regularly.

� Biodiesel fuels may pose low ambient temperature problems for both storage and operation. At low ambient temperatures, fuel may need to be stored in a heated building or a heated storage tank. The fuel system may require heated fuel lines, filters, and tanks. Filters may plug and fuel in the tank may solidify at low ambient temperatures if precautions are not taken. Consult your biodiesel supplier for assistance in the blending and attainment of the proper cloud point fuel.

� Biodiesel has poor oxidation stability, which can result in long term storage problems. The poor oxidation stability qualities may accelerate fuel oxidation in the fuel system. This is especially true in engines with electronic fuel systems because they operate at higher temperatures. Consult the fuel supplier for oxidation stability additives.

� Biodiesel fuel is an excellent medium for microbial growth. Microbes cause fuel system corrosion and premature filter plugging. The effectiveness of conventional anti-microbial additives, when used in biodiesel is not known. Consult your fuel and additive supplier for assistance.

� Care must be taken to remove water from fuel tanks. Water accelerates microbial growth. Water is naturally more prevalent in biodiesel fuels than in distillate fuels.

IRM\10471010.DOC

PMP01-01 4

Caterpillar Biofuel Specification

Property Test Method Test Method Units Limits United States International Fuel Specific Properties

Density @ 15°C ASTM D1298 DIN/ISO 3675 g/cm3 0.86-0.90 Viscosity @ 40°C ASTM D445 DIN/ISO 3104 mm2/s 4.0-6.0 Flash Point ASTM D93 DIN/ISO 22719 °C 100 min Cold Filter Plugging ASTM D4539 DIN EN 116 °C

- Summer 0 - Winter 6 below ambient

Pour Point ASTM D97 ISO 3016 °C - Summer -9 max - Winter -20 max

Sulfur Content ASTM D2622 ISO 8754 % weight 0.01 max Distillation ASTM D1160 ISO 340 °C

- 10% Evaporation To Be - 90% Evaporation Determined

345 Carbon Residue, Conradson (CCR) ASTM D189 DIN/ISO 10370 % weight 0.5 max Cetane Number ASTM D613 ISO 5165 45 min Ash Content ASTM D482 DIN 51575 mg/kg 0.02 max

ISO 6245 Water Content ASTM D1796 DIN51777-1

ISO3733 g/m3 500 max

Particulate Matter DIN 51419 DIN 51419 15 Copper Corrosion ASTM D130 DIN/ISO 2160 No.1 Oxidation Stability ASTM D2274 IP 306 mod. mg/100 mL 15 max Esterification % volume 98.0 min Acid Value ASTM D664 DIN 51558 mg NaOH/g 0.5 max Methanol Content GC Method DIN 51608 % weight 0.2 max Monoglycerides GC Method DIN 51609 % weight 0.8 max Diglycerides GC Method DIN 51609 % weight 0.2 max Triglycerides GC Method DIN 51609 % weight 0.2 max Free Glycerin GC Method DIN 51609 % weight 0.02 max Total Glycerin GC Method DIN 51609 % weight 1.2 max Iodine Number DIN 53241 or DIN 53241 or IP cg I2/g 110 max

IP 84/81 84/81 Phosphorus Content DGF C-VI4 DIN 51440-1 mg/kg 0.2

Maintenance Products and Services Group Product Support Division LC2172 - 309-636-5136

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IRM\10471010.DOC

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Viejas Tribal Government Renewable Energy Development on Tribal Lands of Viejas Study Appendix B. Electrical Interconnections

Appendix B. Electrical Interconnections

Net Metering

Alpine Substation

SDGE Distribution Line Option 2 Delivery Point Primary Metering Location

24 May 2005 B-1 Black & Veatch

Viejas Tribal Government Renewable Energy Development on Tribal Lands of Viejas Study Appendix B. Electrical Interconnections

Interconnected Utility

Option 1 Delivery Point Viejas Substation

Alpine Substation

69 Kilovolt Transmission Line

Stand Alone Utility – Dedicated Distribution Line

j

Alpine Substation

Vie as Dedicated Distribution Line Option 3 Delivery Point Viejas Substation Adjacent to SDGE’s Alpine Substation

24 May 2005 B-2 Black & Veatch

Viejas Tribal Government Renewable Energy Development on Tribal Lands of Viejas Study Appendix C. Base Case Cash Flow Analyses

Appendix C. Base Case Cash Flow Analyses

Operating Year 1 2 3 4 5 6 7 8 9 10

Revenues ($000) Operating Revenues 2,738 2,832 2,929 3,030 3,133 3,241 3,352 3,467 3,586 3,709 Other Income 97 97 97 97 97 97 97 97 97 97

Total Revenues 2,835 2,929 3,026 3,126 3,230 3,338 3,449 3,564 3,683 3,806

Expenses ($000) Power Supply 2,467 2,556 2,649 2,745 2,844 2,946 3,052 3,162 3,276 3,394 O&M 54 55 57 58 60 61 63 64 66 67 Property Taxes 0 0 0 0 0 0 0 0 0 0 Franchise Fee 0 0 0 0 0 0 0 0 0 0

Total Expenses 2,521 2,612 2,706 2,803 2,903 3,007 3,115 3,226 3,342 3,461

Net Operating Income ($000) 314 317 320 324 327 330 334 337 341 345

Debt Service ($000) Principle 72 72 72 72 72 72 72 72 72 72 Interest 170 164 158 153 147 141 135 130 124 118

Total Debt Service 242 236 230 225 219 213 207 202 196 190

Debt Service Reserve Fund 216 220 225 229 234 239 243 248 253 258 Debt Reserve Interest 4 4 4 5 5 5 5 5 5 5

Capital Outlays ($000) 0 0 0 0 0 0 0 0 0 0 Funds Net DS (140) 85 94 104 113 122 131 141 150 160

Income Taxes Utility Tax (City Ordinance) 0 0 0 0 0 0 0 0 0 0 St. Tax/Other 0 0 0 0 0 0 0 0 0 0

Total Income Taxes 0 0 0 0 0 0 0 0 0 0

Net Available Funds (140) 85 94 104 113 122 131 141 150 160 Net Present Value - 10 Yr 651

Debt Service Coverage Ratio 1.30 1.34 1.39 1.44 1.49 1.55 1.61 1.67 1.74 1.81

Fig. C-1. Base Case Net Metering Scenario Cash Flow

15 July 2005 C-1 Black & Veatch

Viejas Tribal Government Renewable Energy Development on Tribal Lands of Viejas Study Appendix C. Base Case Cash Flow Analyses

Operating Year 1 2 3 4 5 6 7 8 9 10

Revenues ($000) Operating Revenues 2,738 2,832 2,929 3,030 3,133 3,241 3,352 3,467 3,586 3,709 Other Income 0 0 0 0 0 0 0 0 0 0

Total Revenues 2,738 2,832 2,929 3,030 3,133 3,241 3,352 3,467 3,586 3,709

Expenses ($000) Power Supply 1,650 1,707 1,765 1,826 1,888 1,953 2,020 2,089 2,161 2,235 O&M 300 312 325 338 351 366 380 396 412 428 Property Taxes 0 0 0 0 0 0 0 0 0 0 Franchise Fee 0 0 0 0 0 0 0 0 0 0

Total Expenses 1,950 2,019 2,090 2,163 2,240 2,319 2,400 2,485 2,572 2,663

Net Operating Income ($000) 788 813 839 866 894 922 952 982 1,013 1,046

Debt Service ($000) Principle 282 282 282 282 282 282 282 282 282 282 Interest 664 642 619 597 574 552 529 507 484 462

Total Debt Service 946 923 901 878 856 833 811 788 766 743

Debt Service Reserve Fund 845 861 879 896 914 933 951 970 990 1,009 Debt Reserve Interest 17 17 18 18 18 19 19 19 20 20

Capital Outlays ($000) 200 203 206 209 212 215 219 222 225 229 Funds Net DS (1,185) (296) (250) (203) (156) (108) (59) (9) 42 94

Income Taxes Utility Tax (City Ordinance) 0 0 St. Tax/Other 0 0

Total Income Taxes 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Net Available Funds (1,185) (296) (250) (203) (156) (108) (59) (9) 42 94 Net Present Value - 10 Yr (1,929)

Debt Service Coverage Ratio 0.83 0.88 0.93 0.99 1.04 1.11 1.17 1.25 1.32 1.41

Fig. C-2. Base Case Utility Scenario Cash Flow (No Generation)

15 July 2005 C-2 Black & Veatch

Viejas Tribal Government Renewable Energy Development on Tribal Lands of Viejas Study Appendix D. Legal Analysis

Appendix D. Legal Analysis

22 September 2005 D-1 Black & Veatch

______________________________________________________________________________

MEMORANDUM

TO: Tribal Council, Viejas Band of Kumeyaay Indians

FROM: Fredericks, Pelcyger & Hester, LLC

DATE: June 23, 2005

RE: LEGAL ISSUES IN THE FORMATION OF A TRIBAL UTILITY

Introduction

The Viejas Band of Kumeyaay Indians conducted a study regarding the feasibility of

constructing a renewable energy project (the “Project”) on tribal lands. See Renewable Energy

Development on Tribal Lands of Viejas Black & Veatch (herein after “B&V”) Project Number

135650, May 2005. This memorandum will address various tribal, federal and state regulatory issues

in forming a tribal utility.

Statement of the Facts

The Viejas Band of Kumeyaay Indians (“Tribe”) is a federally recognized tribe in San Diego

County, California. The Viejas Reservation is comprised of approximately 1,600 acres of tribal trust

lands, with another 15,000 acres that is shared in a joint-trust patent with the Barona Band of

1

Mission Indians.1 The proposed project will be located within the 1,600 acre part of the

Reservation. The Reservation’s electrical needs are currently served by San Diego Gas & Electric

(SDG&E). The Project is to be constructed on tribal land using one or more renewable energy

options. Those options are wind, solar, bio-fuel, co-generation, and fuel cell technology. B&V at

TC-1, TC-2.

The feasibility study identified three different options for the Tribe:

1. Option #1- Net Metering: Under this scenario, the Tribe would remain connected to

SDG&E. The energy generated by the renewable resource would be essentially

credited towards the Tribe’s energy bill.

2. Option #2 - Tribal Utility Interactive with the Grid: Under this scenario, the Tribe

would remain connected to SDG&E but form its own separate tribal utility (“Viejas

Utility”). Energy would be generated on the Reservation but the Viejas Utility

would have an agreement with SDG&E and/or other providers to wheel wholesale

energy on or off the Reservation.

3. Option #3 - Tribal Utility Independent of the Grid: Under this scenario, the Tribe

would form its own separate utility, maintain its current connection with SDG&E,

but in essence become independent of the grid by the constructing its own complete

energy management facilities on the Reservation, and/or purchasing the existing

1 See Viejas Band of Kumeyaay Indians website, “Viejas Past and Present: History” (last visited 6/23/05)

2

distribution system, which is presumably owned by SDG&E. The Tribe may or may

not choose to buy or sell power from or to SDG&E or other utilities.

Legal Analysis

Questions Presented

• Does the Tribe have the authority to charter and operate a tribally owned utility on the

Reservation? If so, what steps does the Tribe need to take to create a tribal utility?

• Will the Viejas Utility be subject to Federal regulation under the Federal Power Act, 16

U.S.C. § 824 et seq.?

• Will the Viejas Utility be subject to the Federal Public Utility Regulatory Act (PURPA) 16

U.S.C. § 2601 et seq.?

• What other federal laws could apply to the Project?

• Will the Viejas Utility be subject to California State Utility Regulation?

As set forth below, it is our legal opinion that the Tribe has sovereign authority to charter and

operate a tribal utility on Reservation trust land. Moreover, the Viejas Tribal Utility would be

subject to Federal PURPA Regulation but no other Federal or State regulation under the above

statutes, if they follow the steps outlined in this memo.

I. Tribal Authority to Own and Operate an Electric Utility.

It is our opinion that the Tribe has inherent sovereign authority to charter, operate and

regulate an electric utility for purposes of providing service to on-Reservation customers located on

tribal lands. After examining the principles of federal Indian law on which we base our opinion, this

section will then discuss the steps which may be taken by the Tribe to exercise and implement its

authority to establish an on-Reservation electric utility.

3

A. The Tribe’s Inherent Sovereign Authority.

Indian tribes have long been recognized as distinct, independent political communities with

the power of self-government over both their members and their territory. Worcester v. Georgia, 31

U.S. (6 Pet.) 515 (1831); California v. Cabazon Band of Indians, 480 U.S. 244 (1987). Tribal

sovereignty does not stem from any delegation of power by federal or state governments, but from

an early acknowledgement by foreign nations coming to the New World that the various native

Indian tribes were separate distinct political entities. Johnson v. McIntosh, 21 U.S. (8 Wheat) 543

(1823). The sovereignty of Indian tribes is therefore inherent, and predates this Tribe’s existence.

Santa Clara Pueblo v. Martinez, 436 U.S. 49, 55-56 (1978). Congress has long recognized the

sovereignty of Indian tribes and federal Indian policy has been dominated by a firm congressional

commitment to the promotion of “Indian self-government including [the] overriding goal of

encouraging tribal self-sufficiency and economic development.” New Mexico v. Mescalero Apache

Tribe, 462 U.S. 324, 334-35 n. 17 (1983). Tribes today continue to possess all aspects of their

sovereignty except that which has been expressly withdrawn by treaty or statute, or by implication as

a necessary result of their so-called dependent status. United States v. Wheeler, 435 U.S. 313, 323

(1978).

The Tribe’s governmental authority over its own members is well-established. McClanahan

v. Arizona State Tax Comm’n, 411 U.S. 164, 167-71 (1973). However, tribal governmental

authority over non-members within the Reservation has been severely diminished by the United

States Supreme Court. The civil jurisdiction to regulate non-Indians in modern times was addressed

in Montana v. United States, 450 U.S. 544 (1981). In Montana, the Supreme Court resolved two

disputes between the state of Montana and the Crow Tribe. The first dispute involved the ownership

of the bed and banks of the Bighorn River within the Crow Indian Reservation. The second dispute

4

addressed by the Supreme Court was the Crow Tribe’s right to regulate hunting and fishing by non-

members within the Reservation on non-member owned land that was held in fee. The Crow Tribe

had proposed to regulate hunting and fishing by non-members on their fee lands within the Crow

Reservation relying on the Crow Tribe’s treaty rights and the Tribe’s inherent sovereignty. The

Supreme Court held that tribal regulatory power over non-member hunting and fishing on fee land

within the Reservation was inconsistent with the Crow Tribe’s dependent status. Montana v. U.S.,

450 U.S. at 551 (citation omitted). The Supreme Court in so holding fashioned a general rule that

the “exercise of tribal power beyond what is necessary to protect tribal government or to control

internal relations is inconsistent with the dependent status of the tribes, and so cannot survive

without express congressional delegation.” Id. at 566-67. Although Montana involved a Tribe’s

attempt to regulate non-members on land owned in fee by non-members, the Court recently

expanded Montana to limit tribal authority over non-members on tribal trust land as well. Nevada v.

Hicks, 533 U.S. 353, 358 (2001); see Smith v. Salish Kootenai College, 378 F.3d 1048, 1051 (9th

Cir. 2004) (explaining Montana and Hicks). The effect of the Supreme Court rulings reversed the

longstanding traditional presumption that Indian tribes retain power until Congress takes it away.

Instead, after Montana, the presumption is that tribes do not retain power over non-members within

the Reservation boundaries.

The Supreme Court in articulating the new presumption of no civil jurisdiction over non-

members granted two exceptions to the Court’s rule. First, “a tribe may regulate, through taxation,

licensing, or other means, the activities of non-members who enter consensual relationships with the

tribe or its members, through commercial dealings, contracts, leases or other arrangements.”

Montana, 450 U.S. at 465. Second, tribes “retain inherent power to exercise civil authority over the

conduct of non-Indians on fee lands within [the tribe’s] Reservation when that conduct threatens or

5

has some direct effect on the political integrity, the economic security, or the health and welfare of

the tribe. Id. at 566. As a result of the Montana decision, absent a recognition of power from

Congress, the Tribe’s authority to regulate non-Indians within the Reservation depends on whether

one of the aforementioned exceptions is applicable.

Tribal authority over non-members within the Reservation was addressed in three other

Supreme Court cases, Brendale v. Confederated Tribes and Bands of Yakima Indian Reservation,

492 U.S. 408 (1989), South Dakota v. Bourland, 508 U.S. 679 (1993), and Strate v. A-1 Contractors,

et al., 520 U.S. 438 (1997). Brendale involved tribal authority to regulate zoning on non-Indian fee

land within the Yakama Indian Reservation. The Supreme Court in Brendale rendered a 4 to 3 to 2

plurality decision with the deciding opinion holding that the Tribe had no authority to zone in the

open area of the Reservation (an area where a significant portion of land was owned by non-

members in fee status), but could zone in the closed area (an area containing mostly Indian trust

land) since it had retained its authority to determine the closed area’s character. The distinction

between open and closed areas was based on a theory of exclusion: the Tribe had lost its inherent

authority to zone non-member land in the open area because it had not excluded non-Indians from

the area. Because the Tribe had not excluded non-Indians, it lost the right to determine the essential

character of the land (i.e., to zone). Congressional delegation or divestment of power was not an

issue, according to the opinion, because Congress had not spoken on zoning. Brendale, 492 U.S. at

433 (Stevens, J., concurring).

The next case that addressed tribal authority to regulate non-Indians within the Reservation

was South Dakota v. Bourland, 508 U.S. 679 (1993). In Bourland, the Supreme Court held that the

Cheyenne River Sioux Tribe did not have authority to regulate non-Indian hunting and fishing on

land and overlying waters located within the Tribe’s Reservation but acquired by the United States

6

for the operation of the Oahe Dam and Reservoir. The Court relied on the Montana analysis and

determined that when the United States acquired the land from the Cheyenne River Sioux Tribe for

flood control purposes, the Tribe lost its right to exclude non-members from the acquired land.

Consequently, the Supreme Court determined that the land taken by the United States for the

operation of the Oahe Dam and Reservoir was treated as non-Indian fee land and therefore the Tribe

could not regulate non-Indian hunting and fishing on said lands. As stated above, after Nevada v.

Hicks, land status is no longer relevant. The limitation on tribal authority over non-members applies

to activity on trust land as well as fee land.

The other Supreme Court case that addressed a tribe’s authority to regulate non-Indians

involved Strate v. A-1 Contractors, et al., 520 U.S. 438 (1997). The Supreme Court in Strate again

relied on the Montana analysis to find that the tribal court of the Fort Berthold Indian Reservation

was without authority to adjudicate a civil dispute between two non-Indians who had an accident

within a state highway right-of-way within the Fort Berthold Indian Reservation.

Collectively, the foregoing Supreme Court decisions have severely eroded the Tribe’s ability

to regulate non-members on fee lands. Today, it seems that Indian tribes have little or no authority

over non-Indians on the Reservation “if the nonmember has a right to be where he is.” County of

Lewis v. Allen, 141 F.3d 1385, 1394 (9th Cir. 1998) (Boochever, J., concurring).

Although it is arguable whether the Tribe would be able to assert civil jurisdiction over non-

tribal members under the second Montana exception discussed above, the Tribe may be able to meet

the first Montana exception by entering into consensual contracts to serve any non-tribal members

on the Reservation. The tribal utility will need to draft its agreements with the non-members in such

a way as to come within the first exception of the Supreme Court’s decision in Montana. Moreover,

Indian tribes arguably retain the authority to regulate electric utility services occurring on trust land

7

regardless of whether the provider or user of such service is a tribal member or a non-tribal member.

Regulation of utilities involves an important exercise of police powers. See Ark. Elec. Coop. v.

Ark. Public Serv. Comm’n., 461 U.S. 375, 377 (1983). As independent sovereigns, Indian tribes

possess police power over their territories similar to those possessed by states. Wauneka v.

Campbell, 22 Ariz. App. 287, 290, 526 P.2d 1085 (1974). It may be asserted that the Tribe’s power

to regulate utilities is an essential attribute of tribal sovereignty as it is a necessary instrument of

self-government and territorial management. Tribal authority to regulate electric power distribution

is no different from its unquestionable authority to impose building, health and safety regulations on

members and non-members alike within the boundaries of the Reservation. Cardin v. De La Cruz,

671 F.2d 363 (9th Cir. 1982).

We conclude that pursuant to its inherent sovereignty, the Tribe is empowered to charter,

operate and regulate an electric utility authority to be wholly owned by the Tribe, and to provide

service to customers within the Reservation, as provided in the discussions supra. We recommend

that the Tribe implement a comprehensive utility regulatory scheme on the Reservation which will

tip the scales sharply in favor of tribal jurisdiction and minimize any interest in on-Reservation

jurisdiction the state may attempt to assert. The Tribe will have regulatory jurisdiction over non-

members if the tribal utility enters into consensual agreements with the non-members to provide

electric utility service.

B. Organization of the Tribe’s Electric Utility.

Initially, the Tribe’s governing body should adopt a Reservation Public Utilities Ordinance.

The ordinance should, among other things, establish a Tribal Public Utilities Commission as the

regulatory body charged with administering and enforcing the ordinance within the jurisdiction of

the Tribe. It could also establish, or prescribe procedures for establishing, rates and charges by on-

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Reservation utilities including, but not limited to, the tribal electric utility. Standards covering the

construction, location and specification of utility facilities should also be prescribed. The ordinance

could also set forth the conditions pursuant to which exclusive certificates of convenience and

necessity would be issued to tribal utilities to serve on-Reservation.2

In addition to promulgating the ordinance, the tribal governing body could issue a charter to

create and empower the electric utility. The charter would be roughly analogous to articles of

incorporation for a state-organized corporation and would be issued pursuant to the powers vested in

the Tribe’s governing body. The charter would establish the electric utility as an authority or agency

of the Tribe, thereby affording it the Tribe’s sovereign immunity and other benefits deriving from

tribal government status. The charter could also empower the electric utility to promulgate bylaws

establishing internal operational procedures.

After the electric utility is chartered by the Tribe, it may then proceed with organizational

and operational matters. It is recommended that the electric utility hire a general manager that is

experienced in the electric utility industry to act as manager and perform the necessary tasks of

developing, constructing and negotiating the purchase of existing utility lines, poles, substation

meters and other equipment to get the utility operational. The manager would be responsible for

staffing the utility, proposing a rate structure consistent with the Tribe’s ordinance, establishing a

billing system, arranging for funding, entering into facility construction contracts, obtaining

necessary government approvals, securing a source of power and other matters necessary for start-

up.

2 In Segundo v. City of Rancho Mirage, 813 F.2d 1387, 1393 (9th Cir. 1987), the Ninth Circuit, in holding the cities’ rent control ordinances unlawful on the Reservation, found significant the fact that application of the cities’ ordinances would preclude enforcement of a conflicting ordinance enacted by the Tribe and effectively nullify the Tribe’s authority to regulate the use of its lands.

9

Taking over SDG&E’s customer base on the Reservation will be difficult logistically, but not

impossible. The easiest way to assume SDG&E’s functions would be to purchase its on-Reservation

distribution system at a negotiated price. In many cases, utility providers on trust land fail to obtain

proper easements for the construction of an operation of their distribution lines, as required by

federal law.

In such cases, the Tribe has a cause of action for trespass damages, which the Tribe can then

use to negotiate a mutually acceptable takeover of the existing facilities, with any damages that the

Tribe can claim to be credited against the agreed value of purchase price of the facilities. Obviously,

if the Tribe and the tribal utility authority can put themselves in a position to acquire the existing

facilities, that will greatly reduce their start-up costs and do away with having to build a new

transmission and distribution system.

A more expensive option is to build an entirely new system, which may be cost prohibitive

depending on existing and potential future customer load on the Reservation. We recommend that

the Tribe enter into negotiations to purchase SDG&E’s existing system.

II. Federal Regulatory Interests

A. The Tribe is Not Subject to FERC Regulatory Control Under 16 U.S.C. '824 et seq.

The federal government regulates the generation and transmission of electric power under

the Federal Power Act, 16 U.S.C. §§ 824-824m, through the Federal Energy Regulatory Commission

(FERC). We opine that a wholly owned tribal utility would be exempt from FERC regulatory

control pursuant to 16 U.S.C. § 824(f) which provides, in regards to certain government owned

utilities:

(f)United States, State, political subdivision of a State, or agency or instrumentality thereof exempt. No provision in this Part [16 U.S.C. '' 824 et seq.] shall apply to, or be deemed to include, the

10

United States, a State or any political subdivision of a State, or any agency, authority, or instrumentality of any one or more of the foregoing, or any corporation which is wholly owned, directly or indirectly, by any one or more of the foregoing, or any officer, agent, or employee of any of the foregoing acting as such in the course of his official duty, unless such provision makes specific reference thereto.

FERC has ruled that a wholly owned tribal utility qualifies as an exempt government-owned

utility under the above statute. Sovereign Power Inc. v. FERC, FERC Dkt. No. ER 98-2995-000

(July 13, 1998). In Sovereign Power, a tribal corporation, wholly owned by the Spokane Tribe of

Indians, wished to sell wholesale power and asked that FERC disclaim jurisdiction over it, which the

Commission did. The Commission applied a test based on the instrumentality definition in City of

Paris, KY v. FPC, 399 F.2d 983 (D.C. Cir. 1968) that looks to whether the utility ”performs an

inherent government function” Id. at 986. The Commission in Sovereign Power ruled that:

The Spokane tribe performs inherent government functions and the funds generated by Sovereign will be used by the tribe on the behalf of the government and in performance of government functions. This money collected by Sovereign will also mean that the tribe will need less funding from the federal government and this generally promotes the goal of encouraging tribal self-determination and economic independence.

Id. at 2-3.

The Commission stated that the Spokane Tribe is ”subject to extensive federal oversight,”

including the protection of trust land and various laws requiring federal approval of proposed tribal

transactions. Id. at 3. FERC further relied on the ”long-standing principle of statutory construction

that >Statutes are to be liberally construed in favor of the Indians, with ambiguous provisions

interpreted to their benefit.” Id. FERC concluded that because the Spokane Tribe is an

instrumentality of the federal government, the Tribe’s wholly owned Power Corporation was not a

”public utility“ for the purposes of FERC’s jurisdiction under the FPA. In determining that the City

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of Paris test applied, FERC considered and rejected opposing cases which held that tribes are not

instrumentalities of the federal government. Id. at 3 (citing United States v. Wheeler, 435 U.S. 313

(1978) and Smart v. State Farm Insurance Co., 868 F.2d 929 (7th Cir. 1989). In footnote 1 of

Sovereign Power, FERC stated that it was issuing a separate notice informing Chickasaw Nation

Industries (a tribal utility) that FERC disclaimed jurisdiction over its application. FERC thus

signaled its intent that the Sovereign Power ruling was to be uniformly applied in Indian Country.

To conclude, the Viejas Utility would be performing an inherent government function by generating

power and funds on behalf of the Viejas government. Thus they would not be a “public utility”.

Sovereign Power has not been challenged in the courts and remains good agency law. Even

if a FERC determination on the Viejas utility were challenged, the federal courts ”give great

deference” to FERC decisions on review. Northeast Utilities Co v. FERC, 993 F.2d 937, 943

(1993). AQuestions involving an interpretation of the FPA involve a de novo determination by the

court of Congressional intent; if that intent is ambiguous, FERC’s conclusion will only be rejected if

it is unreasonable.” Id. at 944. Because Congress did not clearly state its intent as to whether or not

tribes are exempt under 16 U.S.C. ' 824(f), it is our legal opinion that courts would affirm FERC’s

determination of the issue.

The conclusion that a Viejas utility is exempt under16 U.S.C. § 824(f) is consistent with an

opinion by the Solicitor of the Department of the Interior, which found that Indian tribes are

qualified, ”like States and political subdivisions,” to participate under the Small Business

Reclamation Act of 1956, 25 U.S.C. ' 422a-422k.3

3See Solicitor’s Opinion, No. G-65-1097.3 (Dept. of the Interior August 13, 1965) (cited in Indian Tribes as Preference Customers Under the Reclamation Project Act of 1939, Solicitor’s Opinion, No. m-366771 (Dept. of the Interior July 25 1967)).

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Based upon the above legal precedent established by the above-cited authorities, we

conclude that FERC would not have jurisdiction over the Viejas Utility as long as the Utility uses

the net revenues generated by the Utility on behalf of the government and to fund governmental

functions or services.

B. The Tribe Would be Subject to Federal Regulation under the Public Utility Regulatory Act (PURPA), 16 U.S.C. §§ 2601 et seq.

PURPA was enacted by Congress in 1978. Its purpose is ”to promote the development of

new generating facilities and to conserve the use of fossil fuels.“ New York v. FERC, 535 U.S. 1, 9

(2002). Through this Act Congress encourages renewable energy projects such as the Viejas Utility

by securing a market for their power and establishing fair prices for said power. To qualify under

the act is a two step process, the first being as a “small power production facility” and the second as

a “qualifying small power production facility”. The Viejas Utility would qualify as a ”small power

production facility” under 16 U.S.C. § 796(17)(A), which provides that:

[a small power production facility] is an eligible solar, wind , waste, or geothermal facility, or a facility which- (i) produces electric energy solely by the use, as a primary energy source, of biomass, waste, renewable resources, geothermal resources or any combination thereof; and (ii) has a power production capacity which, together with any other facilities located at the same site (as determined by the Commission), is no greater than 80 megawatts.

The Viejas Utility would then be eligible as a ”qualifying small power production facility“

under 16 U.S.C. § 796(17)(e). This is because it would meet the requirements of a “small power

production facility” and though it would be engaged in selling the energy it produces the energy sold

would be generated solely from the same “small power production facility” The statute provides:

...a small power production facility- (i) which the Commission determines, by rule, meets such requirements (including requirements respecting fuel use, fuel

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efficiency, and reliability) as the Commission may, by rule, prescribe; and (ii) which is owned by a person not primarily engaged in the generation or sale of electric power (other than electric power solely from cogeneration or small power production facilities);

16 U.S.C. § 796(17)(e).

Regulation under PURPA could have beneficial effects for the Tribe. If the Tribe chooses to

wheel or sell power outside of the Reservation as suggested in the feasibility study, see B&V, at 7-2,

then under FERC’s jurisdiction, SDG&E and other utilities would be required to purchase the

energy generated by the Viejas Utility under 16 U.S.C. §824a-3(a)(2). See also FERC v.

Mississippi, 456 U.S. 742 (1982) “In order to overcome…these perceived problems, § 210(a) [§

824a-3(a)(2)] directs FERC...to promulgate...rules requiring utilities to offer to sell electricity to, and

purchase electricity from, qualifying cogeneration and small power production facilities.” Id. at 751

(all emphases added). In addition, the utilities must purchase at a price that is ”just and reasonable”

and must Anot discriminate against alternate energy producers (AEPs).” 16 U.S.C. § 824a-3(b). In

conclusion the Viejas Utility would be subject to PURPA jurisdiction and thus would be privy to its

benefits.

C. Other Federal Laws and Regulations

Depending on what type of project Viejas chooses, the following laws, regulations, and

regulatory authorities may apply.

1. Leasing Lands: If the lands on which a project is situated are leased, the

lease needs to comply with 25 U.S.C. ' 415(a) and 25 C.F.R. Part 162. 25 C.F.R. Part 162

requires compliance with NEPA, 42 U.S.C. '' 4321 to 4370d. NEPA requires submission

of an environmental impact statement (EIS) for every major federal action significantly

affecting the quality of the human environment. Leasing lands constitute a major federal

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action. Davis v. Morton, 469 F.2d 593 (10th Cir. 1972). An EIS includes an analysis of

environmental impact, proposed adverse effects, alternatives, maintenance and enhancement

of long-term productivity, irreversible commitments of resources, and other information. 40

C.F.R. ' 1507(a)(1). However, depending on what renewable plan is adopted, an

environmental assessment (EA) may be used to determine whether an EIS is necessary based

on the proposed action. 40 C.F.R. ' 1508.9. If an EIS is not necessary, then a finding of no

significant impact (FONSI) will be issued. 40 C.F.R. ' 1508.9.

2. Clean Air Act (CAA), 42 U.S.C.S. ' 7410(a): The EPA has primary regulatory authority over the on-Reservation air space under the CAA. 42 U.S.C. ' 7410(c).

A tribe may assume authority under Section 7601(d)(1)(A). EPA has primary regulatory

jurisdiction for compliance with the CAA.

The Tribe will need to get a PSD (prevention from significant deterioration) permit

from EPA Region IX for compliance with 42 U.S.C. § 7477 of the CAA and pursuant to 40

C.F.R. Part 52. A PSD permit usually takes 6-10 months, so in certain instances there may

be a need for the Tribe to request an expedited review. Under expedited review, a tribe

would enter into an agreement with EPA through an Administrative Order on Consent and

would consent to mitigate other air impacts in future projects as well as comply with PSD

permitting requirements in exchange for the EPA allowing a project to operate in the interim.

It is not clear whether Region IX (EPA California) has experience with the expedited

process. Within 12 months of operation, a Title V permit application will need to be

completed and submitted to EPA Region IX.

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The State of California or a regional entity does not have air quality jurisdiction over

Reservations in California. Many California tribes have obtained air grants and tribes are

managing their own air quality programs.4

While there may be some technical assistance provided by South Coast Regional Air

Quality Management Authority, the technical assistance is minimal (if any) and the Regional

Authority should be well aware that tribes have jurisdiction over the Reservation.

3. Clean Water Act (CWA) 33 U.S.C. '' 1251-1387: Tribes may assume authority of a project under the CWA. 33 U.S.C. ' 1377. For purposes of a proposed

project, the relevant provision of the CWA is 33 U.S.C. §1342, National Pollutant Discharge

Elimination System (NPDES). If there is any discharge, it may be enough to warrant an

NPDES permit. This will need to be verified by EPA.

4. Safe Drinking Water Act (SDWA) 42 U.S.C. '' 300f et seq.: Tribes may assume authority of a project under the SDWA. 42 U.S.C. ' 300j-11. The SDWA may be

applicable if a project requires drilling for a well, injecting fluids or other materials into the

ground, or creates underground storage for materials. See 40 C.F.R. Part 144.

5. Resource Conservation and Recovery Act (RCRA) 42 U.S.C. '' 6901 et

seq.: The RCRA regulates the disposal of solid waste, including but not limited to

management of hazardous solid wastes, non-hazardous solid wastes and regulation of

underground storage tanks. See 40 C.F.R. Part 260. However, the EPA may not have the

ability to review and/or approve solid waste management plans of tribes and/or tribal

entities. See Backcountry Against Dumps v. EPA, 100 F.3d 147 (D.C. Ct. App. 1996).

RCRA allows for assistance agreements with Indian tribes for hazardous waste management

See the EPA website, “Tribal Air: Region 9 Information”

16

4

programs and underground storage tank programs. 42 U.S.C. ' 6908a. More information

about solid waste produced by the Project is needed to determine whether RCRA compliance

and/or an assistance agreement will be required.

6. Superfund (CERCLA) 42 U.S.C. '' 9601-9675: CERCLA applies to hazardous substance releases, liability and compensation for such releases. CERCLA should

not be an issue to Viejas unless there is or has been an unlawful release at the site.

7. Endangered Species Act (ESA) 16 U.S.C. '' 1531-43: Specifically, Section 9 (16 U.S.C. § 1538(a)) of the ESA requires that “any person” is prohibited from

taking any action that will impact listed species or result in the destruction or adverse

modification of designated critical habitat. This has been interpreted to include Indian tribes.

The Tribe’s natural resources department should make a preliminary determination about

whether any species (listed or proposed) may be present on the site or impacted by a project.

Once the preliminary determination has been made, a request needs to be made to the

Secretary for her determination. 16 U.S.C. '1536(c). If there is a species at risk, a

biological assessment needs to be conducted. Id.

8. National Historic Preservation Act (NHPA) 16 U.S.C. '' 470-470w-6: If the Project site or a building on the site has been designated as protected under the NHPA,

the Project must comply with NHPA requirements. 16 U.S.C.S. ' 470f.

9. Occupational Safety and Health Act (OSHA) 29 U.S.C. ' 667 et seq.: The Occupational Safety and Health Administration of the Department of Labor administers

OSHA. However, state or tribal OSHA programs may assume responsibility for developing

their own occupational safety and health standards by submitting and obtaining Federal

approval of a plan. Id. and 29 C.F.R. Part 1952. However Federal OSHA retains

17

enforcement authority over tribal workplaces. 29 C.F.R. ' 1952.122. Federal OSHA does

not have a construction certification process. However, construction undertaken by the Tribe

or other entity may need to comply with federal construction regulations as promulgated

under 29 C.F.R. Part 1926. Part 1926 also incorporates some requirements outlined in Part

1910, including requirements to be met during the generation, transmission and distribution

of electrical power. Also, the construction project will need to have a safety and health

program, a hazard communications program (29 C.F.R. ' 1910.1200) and other programs as

required by OSHA.

10. Native American Graves Protection and Repatriation Act (NAGPRA), 25

U.S.C. ' 3001 et seq.: NAGPRA applies to objects excavated or discovered on Federal or tribal lands. Should any “cultural item”, 25 U.S.C. § 3001(3) be found on the site, the

handling of such item must be consistent with NAGPRA and the item must be turned over to

the appropriate tribe.

11. Archaeological Resources Protection Act (ARPA), 16 U.S.C. ' 470aa et

seq.: If a project is located on ”Indian lands,” and requires excavation or removal, it must

comply with ARPA. 16 U.S.C. '470ii(c). If excavation of, or removal within, the site is

required, a permit must be obtained. 16 U.S.C. '470cc.

12. Acquisition of Rights of Way: Under the General Right-of-Way Act of

1948, tribal grants of rights of way are subject to Secretarial and tribal official approval. 25

U.S.C. ' 323-328. Applicable regulations are found at 25 C.F.R. Part 169. If future rights-

of-way are needed from the Tribe, the granting of a right-of-way to an entity other than the

Tribe will require compliance with the Right-of-Way Act.

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D. Federal Tax Implications.

The analysis thus far has, per the feasibility study, relied on the fact that the Tribe wishes to

form a non-profit tribal utility. The Tribe may also wish to form a “for profit” corporation. There

are tax implications for the latter.

The Tribe may choose to incorporate a tribal utility under tribal law if authorized by the

Tribal Constitution. The Tribe may also choose to incorporate a tribal utility under Section 17 of the

Indian Reorganization Act (IRA) of 1934, 25 U.S.C. § 477. Incorporation under Section 17 exempts

the enterprise from federal income tax, regardless of where the business is located. Finally, the

Tribe could also choose to incorporate a utility under California state law. However, incorporation

under state law will most likely subject the utility to federal income tax.

III. State Regulatory Authority.

Traditionally, Indian Tribes are recognized as distinct, independent political communities,

with inherent sovereign powers of self-government over both their members and territory.

Worcester v. Georgia, 31 U.S. (6 Pet.) 515 (1821). Because of their sovereign status, tribes, as well

as their Reservation lands, have enjoyed ”a historic immunity from state and local control.”

Mescalero Apache Tribe v. Jones, 411 U.S. 145, 152 (1973). Generally, state laws are not

applicable to the activities of the Tribe or its members on the Reservation unless Congress has

expressly provided that state law applies. Worcester, 31 U.S. at 560-61; see, also Williams v. Lee,

358 U.S. 217, 221 (1959); McClanahan v. Arizona State Tax Comm’n, 411 U.S. 164, 170-71 (1973).

California is a Public Law 83-280 (P.L. 280) state. P.L. 280 granted California

jurisdiction over criminal and certain civil matters involving Indians as a party on Indian lands.

The grant of civil jurisdiction is codified in 28 U.S.C. § 1360(a).

19

P.L. 280 makes a distinction between criminal laws that prohibit conduct and civil laws

which regulate conduct. See California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987).

In Cabazon, the Court held that California could not enforce the state’s gaming laws in Indian

country. The Court held that a state could prohibit conduct under criminal law but could not

regulate conduct under civil law against an Indian in Indian country.

This decision was in line with and further strengthened Supreme Court precedent. The

Supreme Court had previously held that P.L. 280 did not grant a state county the authority to tax an

Indian living on Indian trust land in Bryan v. Itasca County, 426 U.S. 373 ( 1976). In analyzing the

legislative history of P.L. 280, the Bryan court explained:

This construction finds support in the consistent and uncontradicted references in the legislative history to >permitting= >State courts to adjudicate civil controversies= arising on Indian Reservations, H.R.Rep. No. 848, pp. 5, 6 (emphasis added), and the absence of anything remotely resembling an intention to confer general state civil regulatory control over Indian Reservations.

Id.at 384.

Federal statutes which provide for and operate in conjunction with tribal treaties and

regulatory schemes may also preempt state authority. The test for preemption in the context of

Indian law is a balancing test. Generally, state jurisdiction is preempted by federal law if it

interferes with or is incompatible with federal and tribal interests as reflected in federal law, ”unless

the state interests at stake are sufficient to justify the assertion of state authority.” New Mexico v.

Mescalero Apache Tribe, 462 U.S. 324, 334 (1983), citing White Mountain Apache Tribe v.

Bracker, 448 U.S. 136, 145 (1980). Courts assess the relative interests in light of the tribe’s treaty

rights, the tribe’s inherent sovereignty, and Congress’ overriding goal of encouraging ”tribal self-

sufficiency and economic development.” Mescalero Apache, 462 U.S. at 335, citing Bracker, 462

U.S. at 143.

20

Our current understanding is that the Viejas Utility will only serve tribal members on the

Reservation. This scenario comports favorably with this balancing test first articulated in Bracker:

When on-Reservation conduct involving only Indians is at issue, state law is generally inapplicable, for the state’s regulatory interest is likely to be minimal and the federal interest in encouraging tribal self-government is at its strongest.

Bracker, 448 U.S. at 144-45.

The ability of a state to regulate a tribal entity is further limited when a tribal government,

with the support of the federal government, has adopted a comprehensive regulatory policy. See

Mescalero Apache Tribe, 462 U.S. at 341. The Viejas Utility will require drafting of a tribal utility

code, as well as rules and regulations necessary for the operation and maintenance of the utility. A

sample code has been included with this memo.

Based on the above authorities, we opine that the Viejas Utility will not be subject to state

regulation provided that the Tribe adopts a comprehensive regulatory plan and that the energy is

distributed solely on the Reservation.

Conclusion

Based on the above analysis, our opinion is as follows:

1. That the Viejas Tribe has the authority to charter and operate a tribal utility pursuant

to its inherent sovereignty;

2. That FERC will not have jurisdiction over the Viejas Tribal Utility if the utility is

wholly owned by the Tribe;

3. That PURPA will have jurisdiction over the Viejas Tribal Utility. If the Viejas

Utility chooses to sell power back across the Reservation border PURPA would serve a beneficial

effect in assisting the Utility in selling their power and receiving an equitable price for it; and

21

4. That the State of California will not have jurisdiction to regulate the activities of the

Utility if it comports with the requirements set forth in Conclusion 2, above.

H:\VIEJAS\Utility Memo2(No FERC) FINAL.doc

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CHARTER OF THE AHA MACAV POWER SERVICES

ARTICLE I Name

The Fort Mojave Indian Tribe, acting through the Council of the Fort Mojave Tribe and the Fort Mojave Constitution and Bylaws, hereby authorizes this Charter under Article IV of the Constitution of the Fort Mojave Tribe as amended. The name of this tribally chartered authority is the Aha Macav Power Services (AMPS). The Fort Mojave Tribe confers on AMPS all of the Tribe's rights, privileges and immunities as if it engaged in the activities undertaken by AMPS, including, but not limited to, the Tribe's rights of eminent domain, taxation and sovereign immunity.

ARTICLE II Duration

The period of existence of AMPS shall be perpetual, except that AMPS may have this charter amended or restated or AMPS may be dissolved in accordance with the Fort Mojave Tribal Constitution, as amended.

ARTICLE III Purposes and Powers

A. General. The purposes for which AMPS is organized are to provide electric power to all users of such power within the Fort Mojave Indian Reservation and any other utility projects which would benefit the Tribe and that are approved by the Fort Mojave Tribal Council. The Fort Mojave Tribal Council hereby finds and declares that the creation of AMPS is necessary and desirable in order to promote the development of the Tribe's resources, to promote the prudent economic vitality of the Reservation and surrounding communities, to protect the health and welfare of tribal members and to provide employment and training opportunities for tribal members. B. Enumerated Purposes. The purposes for which AMPS is organized are as follows: 1. To develop, operate and manage the provision of electric powers to all users of electricity within and/or on the Fort Mojave Indian Reservation or owned by AMPS unless the Fort Mojave Tribal Council specifically excludes a specific electricity user from AMPS control. 2. To develop, manage and control all other utilities operated within the Fort Mojave Indian Reservation when so requested by resolution or ordinance of the Fort Mojave Tribal Council. 3. To provide training and employment opportunities for members of the Tribe in the construction, management and operation of providing electric power to the users of electricity within the Fort Mojave Indian Reservation. 4. To facilitate economic development on the Reservation and in surrounding communities. Case Study: xxv NEOS Corporation Tohono O'odham Utility Authority 5. To enhance and protect the health and welfare of tribal members and the electric utility customers of AMPS. 6. To manage all electric utility enterprises owned or operated by AMPS in a prudent, efficient and economic manner in accordance with Tribal law. C. Ancillary. To do everything necessary, proper, advisable or convenient for the accomplishment of the purposes hereinabove set forth, and do all things incidental thereto or connected therewith, which are not forbidden by law. D. Enumerated Powers. AMPS shall have the following enumerated powers: 1. To sue and be sued in courts of competent jurisdiction. 2. To enter into contracts and agreements affecting the affairs of AMPS's service area and to accept all funds resulting therefrom. 3. To contract with private persons, associations, or corporations for the provision of any service within or without its boundaries and to accept all funds and obligations resulting therefrom.

4. To borrow money and incur indebtedness and other obligations and evidence the same by certificates, notes or debentures and issue general obligation or revenue bonds, or any combinations thereof. 5. To refund any bonded or other indebtedness or special obligations of AMPS without an election. 6. To acquire, dispose of and encumber real or personal property, including, without limitation, rights and interests in property, including leases and easements necessary to accomplish the purposes of AMPS. 7. To acquire, construct, equip, operate and maintain facilities to accomplish the purposes of AMPS. 8. To manage, control and supervise all the business affairs and properties of AMPS. 9. To adopt, by resolution, rules and regulations consistent with federal, state and tribal law which are necessary, appropriate or incidental to any authorized services provided by AMPS. 10. To delegate the management of the day-to-day operation of AMPS to others, and in exercising its authority hereunder, may rely on its officers and other experts. AMPS shall establish policies and retain responsibility for the ultimate direction and affairs of AMPS but may give usual and essential latitude to AMPS Manager and his delegated employees. 11. To fix and collect taxes, rates, fees, tolls and other service charges pertaining to the services of AMPS, including, without limitation, minimum charges and charges for availability of the facilities or services relating thereto. Case Study: xxvi NEOS Corporation Tohono O'odham Utility Authority 12. To construct, establish, and maintain works and facilities; (a) in, across, or along any easement dedicated to a public use, or any public street, road or highway; (b) in, upon, or over any vacant public lands; and (c) in, across, or along any stream or water course. 13. To plan for the development within the service area served by AMPS including, but not limited to, review of all comprehensive plans of tribal government located within AMPS's service area, and review of all capital construction of other federally funded projects proposed by any governmental entity within the boundaries of AMPS's service area for which review is required by federal, state or tribal law. 14. To require all commercial and residential units within the Reservation to connect to the electric service provided that said unit is within AMPS's designated service area. 15. To have and exercise all powers necessary, convenient or incidental to the express powers identified above. E. Exercise of AMPS's Powers. AMPS shall exercise its authorized powers in good faith and in a manner which is believes to be in the best interests of the Fort Mojave Indian Tribe and the interests of those within AMPS's service area. F. Interpretation. The purpose specified herein shall be construed as both purposes and powers.

ARTICLE IV Ownership

To enable AMPS to carry out its purposes, the Fort Mojave Tribal Council may, from time to time at the request of the Board of Directors of AMPS, vest AMPS with the power to exercise all of the Fort Mojave Tribe's powers with respect to designated tribal properties, both, real and personal, in accordance with the purposes and powers under Article III of this Charter. Such properties transferred to AMPS shall not be revocable by the Fort Mojave Tribal Council during the period AMPS is authorized to exercise control and possession of the transferred properties.

ARTICLE VI Assets

Subject to such contractual rights of others, including the Fort Mojave Tribe, AMPS shall have as its assets, and the authority to acquire, manage, own, use, pledge, encumber, or otherwise dispose of the following:

A. Tribal Property. Tribal properties of a real or personal nature subject to any conditions set out in the Tribal Council's resolution authorizing the transfer of such properties to AMPS. B. Funds. All funds which AMPS may acquire by grant, gift, loan or other means. C. Other Real and Personal Property. All interests in real and personal property whether of a tangible or intangible nature, AMPS may acquire by grant, gift, loan, purchase, lease or other means. Case Study: xxvii NEOS Corporation Tohono O'odham Utility Authority D. Other assets. All earnings, interest, dividends, accumulations, contract rights, claims and other proceeds arising from the above listed assets.

ARTICLE VII Control of Assets

All cash assets shall be deposited, invested, re-invested or paid out pursuant to the contractual obligations of AMPS and in accordance with the standards of prudent business practices so as to ensure the continued existence, integrity and viability of AMPS. Such decisions are reserved exclusively to the Board of Directors of AMPS.

ARTICLE VIII Asset Distribution/Dissolution

AMPS shall determine in its sole discretion as to when a payment is to be issued and the amount of any such payment. Upon dissolution of AMPS, the remaining assets, after payment of all debts and liabilities, shall be returned to the Tribe. In no event shall the Fort Mojave Tribe be liable for any debts or liabilities of AMPS.

ARTICLE IX Board of Directors

The Board of Directors of AMPS shall consist of seven (7) members and is hereby vested with all powers necessary to carry out the purposes of AMPS. The initial members shall be selected by the Fort Mojave Tribal Council. There are no prohibitions against the Fort Mojave Tribal Council serving as the Board of Directors. Members of the Board need not be enrolled members of the Fort Mojave Tribe. However, no more than three (3) Board members of AMPS may be non-members of the Fort Mojave Indian Tribe. The Board members' term of office and their qualifications shall be specified in the Bylaws.

ARTICLE X Registered Office and Registered Agent

The address of AMPS's registered office is Office of the Chairperson of AMPS, Fort Mojave Indian Reservation, 500 Merriman Avenue, Needles, California 92363, and the registered agent at this address is the Chairperson of AMPS.

ARTICLE XI Advisory Board

The Tribal Council of the Fort Mojave Tribe shall act as the Advisory Board to the Board of Directors of AMPS for the purpose of providing information and advice to the Board regarding political, cultural and social issues that concern the Tribe and its members. Case Study: xxviii NEOS Corporation Tohono O'odham Utility Authority ARTICLE XII

Trustee AMPS is the trustee of all assets owned or controlled by AMPS on behalf of the Fort Mojave Indian Tribe.

ARTICLE XIII Litigation

The Fort Mojave Tribe reserves the right to challenge in whatever forum all matters involving AMPS which, in the opinion of the Fort Mojave Tribe, affect its rights, privileges and immunities as a sovereign government. Before initiating or entering an appearance in any such litigation or

administrative proceeding, AMPS shall give at least thirty (30) days, or such time as the court rules allow, prior written notice to the Chairperson of the Fort Mojave Tribe.

ARTICLE XIV Waiver of Immunity

The acts or omissions of AMPS, whether pursuant to the powers enumerated in Article III or otherwise, shall not create any liability, obligation or indebtedness either of the Fort Mojave Indian Tribe or payable out of assets, revenues or income of the Tribe, and only the assets, revenues and income held by or in the name of AMPS shall be subject to, to the extent otherwise permitted herein and by law, to the debts, obligations or other liabilities created or incurred by AMPS. Any waiver of immunity of or by AMPS shall not be construed to waive any immunity of the Fort Mojave Indian Tribe or any other covered persons and entities or extend any liability to any assets, revenues or income of the Fort Mojave Indian Tribe.

RESOLUTION BE IT RESOLVED, that the foregoing Charter of the Aha Macav Power Service, be and the same is hereby adopted, as amended. Upon adoption of the amended Bylaws of the Aha Macav Power Service by the Board of Directors, two signed duplicate originals shall be delivered to the office of the Tribal Secretary of the Fort Mojave Tribal Council. BE IT FURTHER RESOLVED, that the Chairperson and the Secretary of the Fort Mojave Tribe are authorized and instructed to sign this resolution for and on behalf of the Fort Mojave Tribal Council.

Certification We, the undersigned, Chairperson and Secretary of the Fort Mojave Tribal Council, hereby certify that the Fort Mojave Tribal Council met on this day and by a vote of 6 in favor and 0 opposed in a duly called and convened meeting of the Council, adopted the foregoing resolution. Dated this 13th day of July , 1991. Case Study: xxix NEOS Corporation Tohono O'odham Utility Authority (signature) Chairperson Fort Mojave Tribal Council ATTEST: (signature) Secretary Fort Mojave Tribal Council

Mni Sose Intertribal Water Rights Coalition, Inc.

MODEL ENERGY AND UTILITY SERVICE CODE DRAFT

CHAPTER I: GENERAL PROVISIONS

SECTION 1.01 SHORT TITLE:

This code shall be entitled the “Energy and Utility Service Code” and shall be a title within the Tribal Ordinances.

SECTION 1.02 AUTHORIZATION AND REPEAL OF INCONSISTENT LEGISLATION:

1. Authority for this Title is found in the Indian Reorganization Act of June 18, 1934 (48 Stat. 984) as amended, and under Article ___ of the ____________Tribe’s Constitution and Bylaws. The _________________Tribe is a federally chartered tribal corporation that possesses sovereign powers of government within the geographical boundaries of the ___________________Reservation. The Chairman of the ___________________Tribal Council and the __________________Tribe are authorized to make and enforce this law pursuant to the authorities described above and their status as a sovereign Federally Recognized Indian Tribe.

2. Pursuant to the ___________________Tribe’s retention of the full spectrum of sovereign powers, the Tribal Council has the authority, desires to and does hereby establish this Title ____ in order to further the best interests of the Tribe, its members and their communities and for the purposes of managing the natural gas, electrical, telecommunications, railroad, sewer, water and other utility functions of the Tribe, and to regulate all such matters of Third Parties on the Reservation, and for the purposes of facilitating economic development of the Reservation, and providing and saving tribal revenues by effectively managing tribal utility resources.

3. Any prior Tribal regulations, resolutions, orders, motions, legislation, codes or other Tribal laws which are inconsistent with the purposes and procedures established by this Title ___ are hereby repealed to the extent of any such inconsistency.

Model Energy and Utility Service Code Page 2 of 25

SECTION 1.03 JURISDICTION

1. This Title shall be applicable to all natural gas, electric, water, sewer, telecommunication and railroad services provided on the Reservation.

2. Chapter VII, regarding Negotiation of Rights of Ways Across the Reservation, shall be applicable to all crossings of Reservation lands by wires, pipelines, fiber, rail, or other conduits and related facilities for transmitting or transporting energy, telecommunications, water/sewer or utility related products or information, when such crossings require the use of Tribal land rights1.

3. Enforcement of this Title shall be as described herein, or pursuant to the Tribal Court System.

4. To the extent any agreement exists with any Third Party which conflicts with the provisions in this Title, the agreement shall control.

SECTION 1.04 DEFINITIONS

1. Tribal Council: “Tribal Council” means the governing body of the __________________ Tribe, established pursuant to Article ____ of the Constitution of the Tribe.

2. Franchise: A “Franchise” is the right to provide energy, telecommunication, or other public utility services under the jurisdiction of this Title ___ within the Reservation. A Franchise may be “Exclusive” which means that only one entity has the right to provide services within the franchised area, or “Nonexclusive” which means that more than one entity may provide similar services within that franchised area.

3. Order: An “Order” is a decision of the Public Utilities Committee regarding a franchise, which sets or adjusts rates and tariffs, prescribes or enforces rules and regulations, or is otherwise necessary and convenient to carry into effect the provisions of this Title.2

4. Public Utility: The term “public utility” means every corporation, company, individual, or association that owns, controls, operates or manages, except for private use, any equipment, plant or generating machinery, transmission lines or pipelines or produces, transmits, delivers, or furnishes heat, light, water, sewer, telephone or rail service, or power.3

5. Public Utilities Committee4: The “Public Utilities Committee” refers to the Tribal committee established hereunder with the authority and jurisdiction to supervise and control the public utilities described herein.5

1 Possible include a another section for crossing of allotted lands.

2 Kan. Stat. Ann. Sections 66-101 and 66-101(g).

3 See, e.g. Kan. Stat. Ann. Section 66-104 (a), et seq. and 79-5a01

4 Kansas’ Public Utilities Code establishes a State Corporation Commission, generally referred to as the Public

Utilities Commission, to govern public utility providers and services. To distinguish the State Commission from the

2


6. Reservation: “Reservation” means the territory within the present confines of the exterior boundaries of the ________________ Reservation, and all lands outside the exterior boundaries of the Reservation which are under the jurisdiction of the ___________________ Tribe(s), and such other lands without such boundaries as may be added thereto under any laws of the United States.

7. Third Party: A Third Party is any party not already referenced. 6

8. Tribe or Tribal: “Tribe or Tribal” shall refer to the Kickapoo Tribe in Kansas, the Prairie Band Potawatomi Nation, the Sac & Fox Nation of Missouri in Kansas, or the Iowa Tribe of Kansas and Nebraska, individually or collectively.

SECTION 1.05 PERIOD OF DURATION

This Title ___ shall be perpetual, or until revoked or surrendered by action of the __________________Tribal Council.

CHAPTER II: PROHIBITION OF STATE TAXES

SECTION 2.01 STATE TAXES PROHIBITED

All entities providing services under this Title are hereby prohibited from assessing, or including within invoices or bills sent to any entity within the Reservation, for service provided within the Reservation, any tax, tariff, or collection established or imposed by the State of Kansas and not explicitly approved or ratified by the Tribal Council, or its designee.

CHAPTER III: PUBLIC UTILITY COMMITTEE

SECTION 3.01 CREATION OF PUBLIC UTILITY COMMITTEE

A Public Utility Committee is hereby established which shall have the purposes, powers, and authorities described herein. The Public Utility Committee may herein be referred to as the “Committee”.

Tribal entity this Article creates, is called a “Committee” for the purposes of this document. See generally, Chapter

66 of Kan. Stat. Ann.

5 This body can be called by another name at your discretion.

6 If a tribal utility is formed in the future, this code may be amended to exclude the tribal utility from these

requirements if needed.

3


SECTION 3.02 GENERAL PURPOSES, POWERS & AUTHORITY OF PUBLIC UTILITY COMMITTEE

1. The purpose for which the Committee is organized is to provide an entity through which the Tribe may regulate the actions of Third Parties providing services related to all natural gas utility, electrical utility, other energy utility, water, sewer and telecommunications services. The Committee may also regulate certain railroad functions as described herein7.

2. The Committee shall have the power and authority to consider and adopt rules, terms and conditions relating to the quality and character of each kind of product or service to be furnished or rendered by any public utility furnishing such product or service within the Reservation; to require and permit any public utility to make such additions or extensions to its physical plant as may be reasonable and necessary for the benefit of the public, and may designate the location and nature of such additions and extensions and the time within which such shall be completed; and to provide a reasonable and lawful penalty for noncompliance with any of the provisions adopted hereunder.8

SECTION 3.03 SPECIFIC POWERS AND AUTHORITY OF PUBLIC UTILITY COMMITTEE

The Public Utility Committee is authorized to do the following:

1. To adopt reasonable and proper rules and regulations to govern its proceedings, including the assessment of costs on any complaint brought hereunder, and to regulate the mode an manner of all investigations, tests, audits, inspections and hearings not specifically provided for herein,9 to request, receive and analyze information, to hold meetings or informal hearings, and to deliberate as necessary to fulfill its function as described in this Title.

2. To issue Orders binding on Third Parties acting on the Reservation pursuant to this Title.

3. To prescribe rules and regulations for the performance of any service or the furnishings of any commodity under its jurisdiction by including such rules in Franchise documents.

4. To employ or appoint employees, agents, or contractors and to define their duties and fix their compensation.

5. To order improvements to the service or facilities of Franchisees.

6. To ascertain the value of the property of every Franchisee and every fact which, in its judgment, may or does have any bearing on such value.

7 These railroad functions are not enumerated, but are generally described in Kan. Stat. Ann. Chapter 66.

8 Kan. Stat. Ann. Sec. 66-133 (1-3)

9 Kan. Stat. Ann. Sec. 66-106(a)

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7. To order a surcharge on rates under their jurisdiction sufficient to cover the reasonable costs of the Committee’s operation.

8. To apply for and administer grants consistent with the purposes of this Title ____, e.g. prepare and submit a residential energy conservation plan to the federal secretary of energy and receive and disburse and federal funds appurtenant thereto.10

9. To investigate any written complaint made against any public utility governed by the title that any of the rates, rules, regulations, acts or practices of such utility are in any respect unreasonable, unfair, unjust, unjustly discriminatory or unduly preferential, or both, or that any service performed for the public is unreasonably inadequate, inefficient, unduly insufficient or cannot be obtained.11

10. To make joint investigations, hold joint hearings within or without the Reservation, or issue joint or concurrent orders in conjunction or concurrence with any official, agency, instrumentality or commission of any Tribe or State of the United States.12

11. To participate on regional boards or bodies and to participate on national tribal boards or bodies, as is approved by the Tribal Council.

12. Other authorities necessary and convenient to accomplish the duties described in this Title ___.

13. To declare it necessary and in the public interest to acquire and control any franchise supplying water, natural or artificial gas, electric light or power or heat, in the event the franchise of a public utility has expired.13

14. To make recommendations to the Tribal Council on various matters relating to this Title.

SECTION 3.04 LIMITATIONS ON POWERS OF PUBLIC UTILITY COMMITTEE

The Public Utility Committee shall have no power:

1. To expressly or by implication enter into any agreement of any kind on behalf of the Tribe.

2. To pledge the credit or assets of the Tribe.

3. To dispose of, pledge, or otherwise encumber real or personal property of the Tribe.

4. To waive any right, privilege, or immunity of the Tribe or to release any obligation owed to or by the Tribe.

10 Kan. Stat. Ann. Sec. 66-1,186 11 Kan. Stat. Ann. Sec. 66-101e 12 Kan. Stat. Ann. Sec. 66-106(2)(c). 13 Kan. Stat. Ann. Sec. 12-811

5


SECTION 3.05 PUBLIC UTILITY COMMITTEE OPERATIONS

1. The Committee members shall in all cases act as a board, regularly convened, by a majority vote, and they may adopt such rules and regulations for the conduct of their proceedings as they may deem proper, not inconsistent with this Title, and applicable tribal or federal law.

2. A majority of the Committee shall be members of the Tribe. A Committee member’s duties shall be performed in good faith, in a manner the member believes to be in or not opposed to the best interests of the Tribe, and with such care as an ordinarily prudent person would use under similar circumstances in a like position.

3. The initial Committee may consist of a subcommittee of the Tribal Council and other members as are appointed by the Tribal Council. The number of Committee members shall be five, but may thereafter be increased or decreased at any time by a duly adopted resolution of the Tribal Council.

4. The Committee shall elect from its own number a Chairperson and a Vice Chairperson and shall appoint a secretary to keep a record of its proceedings.14 The Chairperson shall be responsible for presiding over meetings of the Committee. The Vice Chairperson shall assume the duties of the Chairperson in the absence of the Chairperson. In the event of a tied vote, the vote of the Chairperson shall break the tie. A quorum of Committee members shall consist of a majority of Committee members. In the event of a quorum not being present, a lesser number may adjourn the meeting from time to time without further notice.

5. Regular or special meetings of the Committee may be called upon the request of the Chairperson or of any two Committee Members. Notice of meetings, other than the regular meeting shall be given by service upon each Committee Member in person orally at a preceding meeting; or by telephone or mailing to the last known post office address of the member, at least three days before the date therein designated for such meeting, including the day of mailing. Such notice shall specify the time and place of such meeting, and the business to be brought before the meeting. No business other than that specified in such notice shall be transacted at any special meeting.

6. Each Committee Member shall have one vote.

7. The Committee shall hold an annual meeting with the Tribal Council beginning with the year 2002. The meeting shall be for the purpose of reporting on the annual activities and business that may come before the Committee. Notice of the meeting shall be posted at customary and appropriate public notice locations at least 30 days in advance of the meeting.

8. The meetings of the Committee shall be publicly noticed and open to the public15, unless deliberation of the Committee over issues before it requires that the Committee declare an executive session. To the extent practical, executive sessions shall be declared as such in the public notices. On important matters affecting the residents of the Reservation, the

14 Kan. Stat. Ann. Sec. 13-1221(a)15 Kan. Stat. Ann. Sec. 13-1222

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Committee shall publish in the Tribal newspaper the nature of the matter and Committee meeting times. The Committee may, in its discretion, hold formal public meetings to better understand the views of Reservation customers and service providers and Franchisees, and to better determine the best interests of the Tribe.

SECTION 3.06 ORDERS OF THE PUBLIC UTILITY COMMITTEE

1. The Committee may regulate Third Parties under its jurisdiction by issuing one of the following types of Orders: a. Orders Approving Franchises or Disapproving a Franchise under Chapter IV of this

Title. An Order Disapproving a Franchise may contain a listing of requirements to be met for reconsideration.

b. Orders Approving Rates or Tariffs or Disapproving Rates or Tariffs under Chapter V of this Title. An Order Disapproving a Rate or Tariff may contain a listing of requirements to be met for reconsideration.

c. Orders Enforcing conditions of Franchises or Rates or Tariffs under Chapter VI of this Title.

2. The Committee shall create a process consistent with the provisions of this Title leading up to the issuance of each of the above types of Orders. When the process is initiated by the Committee by the issuance of a Notice of Franchise pursuant to Chapter IV of this Title, or by issuance of a Notice of Ratemaking pursuant to Chapter V of this Title, or by issuance of a Notice of Enforcement pursuant to Chapter VI of this Title, such Notice shall be accompanied by a tentative schedule for completion of the process and ultimate issuance of the Order.

3. All Orders must be approved by and signed by at least a majority of the members of the Committee.

4. All orders, regulations, services, rates, classifications, etc. fixed by the Committee shall be in force and effect 30 days after approved and shall be prima facia reasonable unless changed or modified by the Committee, Tribal Council or Tribal Court.16

SECTION 3.07 COMPENSATION FOR PUBLIC UTILITY COMMITTEE

1. The Committee members shall receive such compensation for their services as may be determined by the Tribal Council.

2. Committee members shall be entitled to compensation for their actual and necessary expenses, including travel expenses, incurred in the performance of their duties as members

16 Kan. Stat. Ann. Sec. 66-115

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of the Committee. All requests for reimbursement must be approved by the Committee Chairperson and verified by receipts. 17

SECTION 3.08 TERMS OF SERVICE FOR MEMBERS OF PUBLIC UTILITY COMMITTEE

1. Committee members shall be appointed for staggered terms: one position for an initial period of 1 year, two positions

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